Coal firms agree to settle $123m debts

Coal firms agree to settle $123m debts

Leony Aurora, The Jakarta Post, Jakarta

Eight coal producers, which are withholding royalties totaling
over US$123 million, have agreed to settle their debts this year,
an official at the Ministry of Energy and Mineral Resources says.

The coal mining firms, including big league players such as PT
Arutmin Indonesia and PT Kaltim Prima Coal (KPC), as of the end
of June have delayed payments of $118.58 million and Rp 45.16
billion ($4.63 million), said the ministry's Director General of
Geology and Mineral Resources Simon Sembiring.

"They have agreed to pay half of what they owed this month and
settle the rest of the debt this year," he said in a press
conference on Wednesday.

The debts had accumulated since 2001, but the bulk of them
were from the last 18 months, said Simon.

Coal mining companies are required to hand over 13.5 percent
of their revenue to the government from their sale of coal to
both domestic and overseas markets. The royalty is distributed
between the central government and the provincial and regency
administrations where the mine is located.

The companies have said that the payment was delayed as the
government had not reimbursed some value-added taxes over the
years.

"They can demand the tax refund from the (Ministry of
Finance's) Directorate General of Tax, but they cannot delay
payment of the royalty," said Simon.

If the firms continue to delay payment, the ministry would
turn to the Ministry of Finance as the authority to determine the
sanction, he added.

With output estimated to reach above 150 million tons this
year, the coal sector is targeted to contribute Rp 3.6 trillion
of non tax revenues to the state budget.

Next year, with an increase in production of 7 percent to 160
million tons and the estimated rise in global prices, the
commodity is expected to extend Rp 4.5 trillion to the budget.

According to Simon, up to July 12, four companies have started
paying part of the debts, amounting to $8.33 million and Rp 2.17
billion. KPC has given $6.33 million, PT Multi Harapan Utama
(MHU) $2 million, PT Allied Indo Coal Rp 723 million and
Baramarta Rp 1.44 billion.

"We hope not to see any delayed payments next year," he said.

Simon also said that the ministry had canceled its previous
plan to terminate MHU's contract, as the small coal miner has
started to pay its debts. "We will give them some time," he
added.

Coal prices have climbed in the past year as demand from
energy-hungry China continues to rise and soaring oil prices
prompted countries to look for an alternative fuel.

Indonesia produced some 131 million tons of coal last year, of
which about 70 percent was exported to Japan, Taiwan, South
Korea, India and China.